LMS Property Museum Pointe Successfully Passes Rental Cap

LMS Property Museum Pointe Successfully Passes Rental Cap

Any type of homeowner community Board that has attempted to pass a rental cap at their property in the past knows it’s not an easy task. Yet for one Lieberman-managed property in the South Loop, Museum Pointe Condominium Association, this challenge was taken on full force by the Board and property manager and was ultimately successful.

The percentage of rentals in the building started to significantly climb in 2007, when the housing market crashed and put more owners in the position of needing to rent out their units. In mid-2011, the rental rate at Museum Pointe Condominium – a 26-story high-rise with 206 one- to three-bedroom units – was at nearly 35 percent. The Board noticed this and was told by some owners that an increasing rental percentage in the building was lessening the value of their units. A high rental rate also puts owners at a disadvantage when trying to refinance their properties. These factors, combined with the general belief that homeowners treat their properties more gently and with more respect than renters, led the Board to pursue a change to their Declaration by-laws to introduce a rental restriction.

Around this time (July 2011) was also around when the Board brought in Lieberman Management Services as their property management company and hired Association attorney David Sugar from Arnstein & Lehr as their adviser on the rental cap issue.

Using a Grandfather Clause

The Board presented its vision of the policy at two open forums for homeowners. After listening to many opinions, the decision to pursue a policy where every current owner would be allowed to rent his or her residential unit for as long as they continue to own the unit, even if the unit is currently owner-occupied, was well received. However, anyone who purchases a residential unit after April 2, 2012, is not allowed to rent their unit, with three exceptions: 1) a financial hardship exception for those purchasing units after April 2 (e.g., a short-notice move or a divorce); 2) rentals by new owners if and when the rental rate reaches 20 percent; and 3) leasing to family members where new owners can freely rent to immediate family members.

The Board proposed to enact this policy via an amendment to the Declaration rather than just adopting a rule because an amendment offers more permanence, cannot be easily changed by subsequent Boards and can be enforced in court. An amendment did, however, require a super-majority (67 percent) of “yes” votes by owners.

Taking Action

The Board, led by President Phil Vitale, and property manager Scharnez Barnes realized they needed to be proactive and act fast. They mailed letters and descriptions of the policy to each homeowner, organized door drops of information and put signage in the lobby. Homeowners and Board members volunteered as floor captains to deliver information to their specific floor.

Yet, Vitale said, at the end of 2011 when the Board was assessing its progress, it was short of its goal of 67 percent. At that time they only had about 30 percent response rate, most of it favorable. Vitale, Barnes and the rest decided to regroup and double their efforts.

“What can we do to reach those who haven’t responded?” Vitale said. “The Board took even more initiative along with floor captains to go back again and reach people on floors to encourage a vote. We organized a phone call list for those who didn’t live in the state or reside in the building. On the weekends, Board members, floor captains or Scharnez manned the desk to talk to more people entering or exiting the building to ask them to make a decision.”

Taking these steps, along with communicating electronically via the building’s website and sending out newsletters, raised the favorable percentage to about 50 percent with six weeks left in the process. The Board and floor captains started individually calling each owner that hadn’t responded, particularly focusing on the owners that had a larger ownership share (extra parking spaces, a bigger unit, etc.)

In the end, the Board was successful in capturing a 69 percent “yes” vote.

Capping it Off

“What made this work is the Board really wanted it and they were motivated to put in the extra work setting up information in the lobby and working on the weekends,” said Barnes. “I tried to go above and beyond as well and take on a cheerleader role in the process.”

“I’m very, very pleased,” said Vitale. “There was excellent teamwork between the Board, individuals who stepped up and volunteered, and Scharnez. Many people didn’t think we could do this.

“It’s going to take years for this to unfold,” he continued, “with the grandfather clause, current economy and foreclosures, it’s going to be a tough going to get [the rental rate] down immediately, but we do have a plan in place to have some continuous reduction. It could take two years to get it down to the low 30s or five years to get it down to the mid-20s. But it won’t go over where we started.”

Vitale and Barnes both agree it was a joy to see the Board, the manager and a small set of unit owners work together to accomplish a significant goal. Even unit owners that were not floor captains volunteered their time and efforts.

“Many times we’ll have Board meetings with very few attendees and these were some of the most well attended meetings and forums and that was very positive,” said Vitale. “Setting out a challenging goal, working towards it and achieving it was very gratifying.”